Commentary: It's time for an early VOD window

2:53 PM PST 06/02/2010 by Schuyler M. Moore, AP

Day-and-date distrib'n model for films could eliminate piracy

Boy, the times they are a changin'. Just a few months ago, Disney fought a major battle just to move up the DVD window for "Alice in Wonderland" to 12 weeks after its theatrical release. But now, a cold wind of piracy and drooping DVD sales is forcing all the studios to look hard at closing the window and going day-and-date for at least VOD, though the first step might be a 30-day hold-back as a sop to theaters.

It is none too late to close the window because right now we have, in order, the theatrical window, the piracy window and the VOD/DVD window. Gee, I wonder whether there is any relation between increasing piracy and sagging DVD sales? Do you think the music industry might offer a useful analogy?

The first indication that studios are getting serious on this issue was the recent FCC waiver, permitting them to encode VOD programming with a signal that will disable recording technology until the earlier of 90 days after the theatrical release or the date of the DVD release. This ruling was requested by the MPAA specifically to let studios prevent copying of films that are distributed by VOD commencing any time after the theatrical release, and one doesn't apply for a concealed-weapon permit unless one plans to use it.

The latest sign of changing winds came from a story on the front page of the Wall Street Journal that Time Warner Cable was pitching the studios to release films on VOD shortly after theatrical release. Given the secrecy with which these discussions typically take place, the "leak" of the story likely was an intentional trial balloon to see how loud the theaters would kick and cry, for movie-house owners are the only impediment to closing the window.

The primary purpose for this paradigm shift is to protect content and stop piracy. The film industry must offer a legal alternative to satisfy the demand for films during the current piracy window, or it risks being Napsterized by illegal downloads, as was the music industry.

With authorized downloads, it is possible to limit the copying and sharing of films beyond the home and mobile devices of the recipient. In contrast, pirated films can be shared freely over peer-to-peer networks; many films are pirated online before the popcorn is gone on the first screenings. I have talked to kids from around the world who brag about the ability to download perfect-quality films and watch them on a large-screen TV within days of the U.S. theatrical release -- if not before. No wonder DVD revenue is being hammered.

Another important reason for this shift is to use the advertising expenditure that accompanies the theatrical release to best advantage, instead of having to gear up the marketing machine for each window.

Although this window-shattering approach causes angst to theaters, the angst is more emotional than economic for several reasons: First, the size of the current VOD market is not substantial enough to have a significant impact on any other media. Second, VOD usage typically is an incremental increase and does not cannibalize other media. For example, VOD is not a replacement for the primacy of the theatrical release; people like to get out of the house, and theaters offer a group emotional experience that transcends the home experience.

The most commonly expressed fear about moving up the VOD window is the risk of piracy, but this fear is misplaced. VOD over the Internet is targeted at consumers who are more technologically savvy -- and thus more likely to pirate a film if no legal downloading alternative is available. Although all copy-protection technologies can be circumvented, VOD is more secure than DVDs because DVDs use a single, uniform method of protection, which was broken long ago by a program now widely available for free, whereas VOD protection can be updated at will to limit the ability of the films to be copied or shared. Thus, the fear that VOD will result in more piracy is a bugaboo.

In summary, (a) there is an incremental increase in revenue to be made off VOD with an early window, (b) films delivered via VOD are more secure than DVDs and (c) providing an early VOD window is likely to eliminate piracy for all but a hard-core few that are willing to commit crime just for the fun of it.

VOD in an early window is a distribution model whose time has come, and you don't need a weatherman to know which way the wind blows.

Schuyler M. Moore is a regular commentator for The Hollywood Reporter. A lawyer at Stroock, he is the author of "The Biz, Taxation of the Entertainment Industry, and What They Don't Teach You in Law School." He is an adjunct professor at UCLA Law School and the UCLA Anderson School of Management. He can be reached at smoore@stroock.com.
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